September 30, 2010

Asia was mixed with Shanghai
higher and Japan down 1.7%. European bourses are lower at midday with Ireland
the focus of the boo boys and girls. Oil has a $78 handle and the gurus are
saying that Gold needs a rest after topping $1300 a few days ago.
*****

Today is Quarter end. We have
been informed that the Employment Report won’t come until next Friday.
*****

Tony Curtis died and last week it
was Eddie Fisher. Our kids and grandkids don’t even know who they were. We are
getting on in years.
*****

Quarter GDP in its 3rd revision
(we think there are four- the better for the boys and girls to trade) was
revised to up 1.7% from up 1.6%. Jobless claims were lower at 453,000. Those
numbers have induced a small rally in the major market measures from negative
to positive in pre-opening trading.
*****

Chicago PMI was 60 versus 56 in
August and that rallied the DJIA to up 100 fifteen minutes into the trading
day. We are making an opposite bet by trading SDS, the double
short S&P 500, in some larger accounts.

*****

Diane Swonk, Chief Economist Mesirow Financial

Surviving Subpar Growth

Initial unemployment claims
fell to 453,000 during the most recent week and after being revised up on what
was already a disappointing figure last week. Claims remain extremely elevated,
especially in light of last week's news that the recovery is
"officially" more than a year old - according to the National Bureau
for Economic Research, the group that decides these things. Moreover,
continuing claims abated slightly, and were revised down instead of up last
week, which is good news. Everything is relative, however, so the news on
claims will not be enough to make anyone feel better about the labor market.
(Claims should be well below the 400,000 threshold by now, if the recovery had
any real momentum to it.)

Indeed, payroll employment,
which is scheduled to be released on October 8, probably contracted again in
September. Another loss in government payrolls will be the primary reason,
especially now that emergency stimulus funds are running out. Private sector
payrolls likely increased slightly during the month, but not enough to stop the
unemployment rate from rising further.

Separately, real GDP for the
second quarter was revised for a third time (we won't know what really happened
for another several years, when final benchmark revisions are completed). The
economy grew at a 1.7% rate, close to the estimate that we saw last month.
That, however, is less important than the fact that we will see two (maybe
three) quarters of less than 2% growth, which means an even higher unemployment
rate before the year is over. Why does anyone want to run, let alone win, an
election in November?

*****

We sold the SDS
for a 40 pennies profit.

*****

At 10 AM the major market
measures are negative with the 1% move evaporated.
*****

(Bloomberg) The Mystery of
Disappearing Proprietary Traders

Commentary by Michael Lewis

Sept. 30 (Bloomberg) -- In the run-up to the vote on the financial
overhaul bill, the big Wall Street banks squashed an attempt by Senator Carl Levin to pass a simple ban on any form of proprietary trading.

A Senate staffer close to the process told me the amendment was one of
Wall Street’s highest priorities, spreading money around to exert as much
pressure as possible.

It worked: Levin’s amendment never reached the Senate floor for a vote.
The final version of the bill restricts proprietary trading but allows big Wall
Street firms to invest as much as 3 percent of their capital in their own
internal hedge funds. How exactly the new rules are enforced is left to
regulators inside the Federal Reserve, but it’s not hard to see how a wholly
owned hedge fund might become a proprietary trading group, with a different
name.

The 3 percent loophole amounted to an invitation for the big banks to
keep on doing at least some of what they had been doing -- which is why Levin
felt compelled to remove it, and the banks fought so hard to keep it.

Yet in just the past few weeks news has leaked that Morgan Stanley,
JPMorgan and Goldman Sachs all intend either to close their proprietary trading
units or to sell their interests in the hedge funds they control.

Obviously, something is wrong
with this picture. Why fight for a right, and win, only to proceed as if you
have lost? Why take prisoners only to surrender to them? Having preserved their
loophole the big American banks now appear to be freely abandoning any attempt
to exploit it. (Credit Suisse, on
the other hand, just bought a stake in a hedge fund.)

European stock markets edged
lower as investors digested details of the Irish banking bailout and Moody's
downgrade of Spain. Oil ended at $79.90 up $2 and Gold was $1306. Several hedge
funds must have large Oil positions.
*****

The HFT folks are
smiling tonight as they count there pennies that add up to millions every day.
With the DJIA up 100 then down 70 and finally closing down 0.5% the computer
jocks and jockettes made all the money to today. Breadth was flat and volume
light as September ended with a whimper.

*****

September 29, 2010

Asia was mostly lower overnight.
Hewlett Packard raised earnings estimates and is trading 1% higher. Investors
Intelligence has 43% bulls (41% last week) and 27% Bears (29%). It is a market
truism that as prices rise folks become more bullish and as prices fall they
become more bearish. That is known as buy
high sell low and analysts are the greatest practitioners of this strategy.
*****

In his investment outlook, Gross
wrote that future investment returns will be “far lower” than the historical
averages and a less levered hedge fund community, faced with lower yielding
assets, will likely resign itself to “a high single-digit future…Some
characterize it in biblical terms – seven fat years to be followed by seven
years of lean,” he wrote.

Interesting take on tax cut extension:
While The Hill titles the article Dems, Obama Divided Over Locking In Bush Tax Cuts, the real news out of this article for me
is the emergence of honest to goodness deficit hawks in the Senate (as opposed
to the phony ones you see on Sunday talk shows. From the article:

<

Several senators, including Democratic Policy Committee Chairman Byron
Dorgan (N.D.), are hesitant about giving up an estimated $1.5 trillion in
revenue over the next decade, when the federal deficit is unsustainable and
there are no obvious spending cuts to fix it. They say it would be smarter to
pass a short-term extension of the expiring Bush tax cuts for families earning
less than $250,000, then re-evaluate tax policy in a year or two when the
economy is stronger.

“I think a far better approach is to extend the middle-income tax cuts
for two years and then make a judgment,” said Dorgan. “I don’t think we should
get locked into any specifics. It locks us in to say this is going to be
permanent,” added Sen. Tom Udall (N.M.). [. . .] Sen. Dianne Feinstein
(Calif.), an influential member of the Senate Democratic Conference, said a
temporary extension is “worth talking about.” [. . .] Sen. Sheldon Whitehouse
(D-R.I.) said he would support a short-term extension of the middle-class cuts.
“I think that’s a good idea,” he said. “As long as we get them extended now, so
we get past the early part of next year with the economy still in extremis in a
lot of states like my own.

(Emphasis supplied.) I think that President Obama has played the issue
shrewdly - demanding permanent tax cuts for the middle class and vehemently
opposing tax cuts for the rich. Real deficit hawks now have a position they can
flock to - temporary middle class tax cuts and NO tax cuts for the rich. This
can work. http://www.talkleft.com/*****

Counterfeit Court Summons:With each passing day, the revelations in mortgage-gate, which has for
now implicated GMAC and JPMorgan in foreclosing on mortgages without titles,
and will likely soon proceed through the entire mortgage origination industry
like wildfire as more and more of those foreclosed upon begin to challenge the
process (we wonder just what the statute on limitations for retroactive
challenges is), are getting increasingly more bizarre. Today, courtesy of Alan
Grayson's office we discover that not only are servicers foreclosing on
mortgages to which nobody apparently owns the title, but that servicers,
representing such reputable firms as Deutsche Bank National Trust Company, are
willing to counterfeit court summons in their pursuit of a clean and efficient
foreclosure mill. As Grayson's office points out: "Apparently what’s
happening is that private process servicer companies may not be serving people
with summons, and are simply counterfeiting the documents so they can keep the
fees without doing the work. For the whole story http://www.zerohedge.com/article/mortgage-gate-just-got-wierder-counterfeit-court-summons*****

September 28, 2010

Asian market were lower overnight
and Europe is mixed at midday. Oil has a $75 handle as the trading day begins.
*****

Consumer Confidence came in at 48 versus 53 expected.
*****

(WSJ) Most European stock markets finished marginally lower Tuesday, as
euro-zone sovereign-debt concerns and dismal economic data out of the U.S.
stoked nervousness about the global economic outlook.
*****

Gold ended at $1308 up $10 and
its first close over $1300.
*****

The DJIA was down 70;
up 50; flat; and up 50 into the close. S&P 500 closed at 1148, right below
1150 resistance. Breadth was flat, financials mixed and volume light.*****

Led by declines in production-
and employment-related indicators, the Chicago Fed National Activity Index
decreased to –0.53 in August from –0.11 in July. None of the four broad
categories of indicators that make up the index made a positive contribution in
August.

The index’s three-month moving
average, CFNAI-MA3, declined to –0.42 in August from –0.27 in July. August’s CFNAI-MA3
suggests that growth in national economic activity was below its historical
trend. With regard to inflation, the amount of economic slack reflected in the
CFNAI-MA3 suggests subdued inflationary pressure from economic activity over
the coming year.

September 24, 2010

Last night the markets were doom
and gloom and this morning they are filed with frabjous joy as durable goods
orders were better than and Ireland
didn’t collapse into the ocean last night. Also CNBC interviewed a well known
hedge fund manager who has been hot the last ten years as a guest this AM and
he is bulllllllllllllllllllllllllllllllllish. Asian
markets were mildly lower overnight as are European markets at midday. U.S.
market measures will open 1% higher based on premarket futures trading. Gold
hit $1300 per once overnight and Oil has a $75 handle as the trading day
begins.
*****

It’s interesting how North
Dakota, the state of rugged individualists who don’t want more government turn
to that same wicked government for financial help when disaster strikes.

..... By the end of 2010, the federal government will have spent more than $1
billion to ease the threat, buying flooded property, building dikes and making
other improvements. That figure does not include a $27 million
floodwater-diversion channel built by the state on the west end of the lake. It
also costs $330,000 a month for the electricity for pumps to take 1 inch off
the lake....

September 23, 2010

Many Asian markets were closed to
celebrate the arrival of Autumn or Spring-depending and European markets are
lower. U.S. futures are also lower as the trading day begins.
*****

In the week ending Sept. 18, the
advance figure for seasonally adjusted initial claims was 465,000, an increase
of 12,000 from the previous week's revised figure of 453,000. The 4-week moving
average was 463,250, a decrease of 3,250 from the previous week's revised
average of 466,500.
*****

Interesting anecdote http://www.talkleft.com/The TL kid and I just got new laptops. I ordered him a Dell over Labor
Day, which took two weeks to build and arrive, and when it did arrive, it had
black screen death. After more than two hours on the phone with a very pleasant
tech person in India, and later, his supervisor, it still shut down immediately
after starting.

Most likely, it had conflicting components, and since they stopped
offering the 1G video card in that model last week, I'd bet that was the
problem. But whatever the cause, since a replacement would have come with an
integrated video card when I paid for a 1G, I went back to Sony, who I've
always had good results with. They are having a sale too, and after hours of internet shopping, where everyone offers slightly
different features, the best deal turned out to be at the local Sony Style
store. And I liked the one I was getting for him so much, I ended up buying one
for me as well.

I'm not bashing Dell, I love their desktops, and most likely will buy
my next one from them, but it was a disappointment. At least the return process
was simple, and as I said, their tech people tried really hard to figure out
what was wrong and were very pleasant.

*****

(Bloomberg) -- The
index of U.S. leading indicators rose in August more than forecast, signaling the economy will keep expanding through
early next year. The 0.3 percent gain in the New York-based Conference Board’s
gauge of the prospects for the economy in the next three to six months follows
a 0.1 percent increase in July. The index was forecast to rise 0.1 percent,
according to the median estimate in a Bloomberg News survey of 56 economists.
For more:

Savoir Beds, a 105-year-old
luxury British company, opened its first store in New York last weekend. A
cynic might wonder if the No. 1, the $50,000 mattress they were touting, was a
marketing ploy, a question we put to Roger Ericson, the company’s London-based
creative director. http://www.nytimes.com/2010/09/23/garden/23roadtest.html*****

(WSJ) European stocks slumped as data showed Ireland's economy contracted
again in the second quarter of the year, reigniting fears over the health of
the euro-zone economy.
*****

The S&P 500 opened
lower then rallied into positive territory but in the last hour the HFT
computers took stocks down and the S&P 500 lower to 1124 off 10 points. The
other major measures also closed lower. We expect the major measures to hold up
into month end (which is also quarter end). Oil ended at $74.81 and Gold was
unchanged at $1293. Volume was light and Breadth ended 2/1 negative.

*****

September 22, 2010

(Baltimore Sun)Wednesday
night will be the night of the full Harvest Moon. The moon won't be
perfectly full until 6:18 a.m. Thursday morning. But no one will be able to
tell the difference. It's still, officially, the night of the Harvest Moon. So
enjoy.

The Harvest Moon, by the way, is
defined as the full moon closest in time to the autumnal equinox. That, as it
happens, occurs 10:23 p.m. CDT on Wednesday evening, so it would be hard to get
a much more definitive Harvest Moon.

Also appearing on this busy
evening is the planet Jupiter, which many skywatchers have been admiring for
weeks (see posts below) as it gleams brightly in the eastern sky after
sunset. Jupiter was at opposition early this morning, directly opposite the sun
as seen from Earth.

The Earth reaches opposition with Jupiter once a year, as both
planets orbit to the same side of the solar system. That also makes
it their closest approach of the year.

And it takes Jupiter 12 years to circle the
sun once. So once on each of Jupiter's orbits of the sun, it passes
perihelion - the point in that slightly lopsided orbit that is closest to the
sun and therefore also to the inner planets, including Earth.

This year, opposition and
Jupiter's perihelion are occurring at nearly the same time. That makes
this the nearest Earth and Jupiter will be until 2022. Amateur
astrophotographers are having a field day with Jupiter. There's a gallery of their images here.

So if you have a pair of binoculars,
or a small telescope take a few minutes to get a look at Jupiter. Even in
binoculars, Jupiter appears as a round disk, not a point of light. And if you
hold the glasses steady enough, you should be able to pick out as many as four
of the planet's Galilean moons, strung out like
tiny beads on either side of the planet.

Even if you just step outside
this evening, or Wednesday evening, and look with only your eyes, you're sure
to be impressed by Jupiter's brilliance in the evening sky, and the moon's.
Jupiter remains in the sky all night this month, rising from the east
to its highest point at midnight, before moving toward the western horizon
before dawn.

Which brings us to the third
event of the night of Sept. 22/23. Soon after the Harvest Moon begins climbing
into the eastern sky, look for Jupiter to rise close behind it. The two
brightest objects in the sky this month
will be in "conjunction" on this evening, separated by about the
width of your hand held at arm's length.
*****

Blockbuster files bankruptcy. Netflix
is king.
*****

Asia was mixed and Europe is
lower. Adobe had better than earnings but was moderate in
its forecast going forward and the pooh
bahs have decided the stock is a sell and it is down 20% in early trade. We
may pick up a few shares for an anchovy trade.
*****

(Yahoo/Finance) Adobe Systems Incorporated operates as a
diversified software company in the Americas, Europe, the Middle East, Africa,
and Asia. It offers a line of creative, business, Web, and mobile software and
services used by creative professionals, knowledge workers, consumers, original
equipment manufacturers, developers, and enterprises. The company’s Creative
Solutions segment focuses on solutions for professional publishing, Web design
and development, professional photography, video production, animation and
motion graphic production, and printing visually rich information. Its Business
Productivity Solutions segment provides applications and services to share
information and collaborate; and server-based enterprise interaction solutions
that automate people-centric processes. The company’s Platform segment offers
developer solutions and technologies, including Adobe Flash Player, Adobe AIR,
and Flash Builder, which are used to build rich application experiences in
addition to solutions that create experiences through rich content, user
interfaces, and data services on mobile and non-PC devices, such as cellular
phones and consumer devices. Its Print and Publishing segment includes products
and services that address market opportunities ranging from the diverse
publishing needs of technical and business publishing, and OEM printing
businesses. The company’s Omniture segment provides Web analytics and online
business optimization products and services to manage online, offline, and
multi-channel business initiatives. Its software runs on personal computers
with Microsoft Windows, Apple Mac OS, Linux, UNIX, and various non-PC
platforms. The company distributes its products through a network of
distributors, value-added resellers, systems integrators, independent software
vendors, and OEMs directly to end users and through its Website adobe.com. It
has a strategic alliance with Conviva, Inc. The company was founded in 1982 and
is headquartered in San Jose, California.
*****

Like Lemmings Off A Cliff

Abode Systems downgraded at Credit
Suisse to Neutral from Outperform on lack of near term catalysts and expecting
revenue to decline next 4 quarters. Price target $32.50.
Adobe Systems downgraded
at ThinkEquity from Buy to Hold. $30 price target. Weaker demand could extend
into the new year.
Adobe Systems downgraded
at UBS from Buy to Neutral. $30 price target. Earnings momentum has slowed
down, which could cut into the company's multiple.
Adobe Systems downgraded
at Baird from Outperform to Neutral. $36 price target. Company gave
disappointing guidance and the stock lacks near-term catalysts.
*****

We sold the rest
of our Nvdia. Hopefully we can buy it back lower in the next few months. We
also cut our Intel position in half and reduced our HPQ. We are looking for a
trade in JCG with the HPQ money but haven’t pulled the trigger yet.*****

Larry Summers is leaving the
White House and going back to Harvard where he made a mess too when he was
President. Hopefully Summers is gone for good. He didn’t do too much as the
Repubs suggest; he did too little especially on the stimulus.
*****

The major market
measures closed mildly lower on Wednesday in light trading. Breadth was
negative. European bourses also closed lower. Gold was $1292 and Oil ended at
$74.70.

*****

September 21, 2010

The Fed meets today and will
issue its mumbo jumbo comment at 1:15PM. Ireland and Spain sold debt and Europe
rejoiced while Asia was lower overnight. Housing starts were up 10% in august
versus a low July number. Today is Turnaround Tuesday and the Equinox
approaches as does the full moon.
*****

A little background here: Buffet
and B-H made a $5 billion equity investment in Goldman Sachs at the height of
the financial crisis. If Goldman doesn't get $13 billion via the AIG bailout,
that investment vanishes. If Goldman doesn’t get handed a federal bank charter
overnight (allowing them to borrow huge amounts of cheap cash from the Fed) and
doesn't get a ban on short-selling and doesn't get $10 billion from the TARP,
again, B-H loses that $5 billion. Moreover Berkshire-Hathaway is the largest
shareholder in Wells Fargo, which got $25 billion from the TARP and also had
government help in acquiring Wachovia in a shotgun wedding for $12.7 billion
(W-F balked at buying Wachovia until it was given about $25 billion in tax
breaks by the government).

So that's just two of
Berkshire-Hathaway's biggest investments that collectively received at least
$70 billion in government aid during the bailouts, by my count (this doesn't even include the various Fed facilities and
lesser-known bailout programs that helped banks like Goldman and Wells-Fargo
stay afloat). And this Munger guy wants to tell us that this is no problem, but
individuals who think the government should have bailed them out are whiners
and malingerers. Here's how he put it at a discussion at the University of
Michigan, per Bloomberg:

At the Michigan event, [one questioner] asked whether the government
should have bailed out homeowners instead of Wall Street, Munger
said: "You've got it exactly wrong."

There’s danger in just shoveling out money to people who say, ‘My life
is a little harder than it used to be,’” Munger said at the event, which was
moderated by CNBC’s Becky Quick. “At a certain place you’ve got to say to the
people, ‘Suck it in and cope, buddy. Suck it in and cope.’”

I’m not sure individuals should have gotten a bailout either. But if
billions of bailout dollars helped pay your Christmas bonus, then on that
subject, I think, the correct move is to (just) shut up.

*****

The Fed said it will help the
economy if the need arises. The major market measures rallied ½% on the news.
Or rather the HFT computers pushed the major measures ½% higher on the news.
*****

The major measures
gave up their gains in the last half hour of trading and closed mixed on the
day. The three stocks we still own in the Model closed higher on the day.
Breadth was negative and volume was light.

September 20, 2010

The full (harvest)
moon (9/23) is in conjunction with the autumnal equinox (9/23).

We sold on Friday
and today. The major market measures are up too many days in a row for our
comfort. With the present market it is either feast or famine. We have had a good
run and we aren’t pigs. Stocks are anchovies until the SEC reigns in the HFT
traders which isn’t going to occur anytime soon.

We are holding Intel,
Hewlett Packard and Nvdia.

*****

Diane Swonk, Mesirow
Financial Chief Economist

NBER Declares the Recession "Officially Over"

The National Bureau for
Economic Research (NBER), the group which is charged with officially dating
business cycles, has finally declared an end to the Great Recession of
2008-2009. As expected, the economy "officially" hit a trough in
June 2009, some fourteen months ago. The committee was careful to stress,
however, that just because the economy hit a trough doesn't mean that
conditions since then have been favorable - in case you missed how bad
things have been since then. They also stressed that any subsequent
downturn would now be considered a separate event, or could be called, in
layman's terms, a "double dip," rather than an extension of the
previous recession.

I know that this all seems
like a game of semantics and in many ways it is. What it does confirm,
however, is that as bad as things are, it could be worse. That isn't much
to go on, but it is better than the alternative. The length of time it took
to determine when the trough occurred is testimony to how weak the recovery
has been given the depth of the losses we have endured. We still have a
long way to go to repair the damages, some of which were more than thirty
years in the making.

*****

(WSJ) Asian
stocks posted a mixed finish, with China shares falling to their lowest level
in more than five weeks over concerns Beijing will move to tighten lending in
the banking sector.*****

The major market
measures gained 1.5% and more in light trading. Breadth was 3/1 positive.
European bourses also closed higher.

September 17, 2010

September 16, 2010

We will be taking
tomorrow off so the next post is Monday September 20.

*****

(minyanville.com) Ford Motor is boosted to Overweight from Equal Weight at Barclays Capital, its
price objective also increasing to $16 from $15 which would allow for 34%
potential upside from Wednesday's close. It cites Ford's "favorable
product" and "stripped-down cost base" among the positives.

*****

(Bloomberg) -- Applications for U.S. unemployment benefits
unexpectedly fell last week to the lowest level in two months, a sign the labor
market is improving.

Initial jobless claims dropped by 3,000 to 450,000 in the week ended Sept. 11, Labor
Department figures showed today in Washington. The median forecast was for a
rise to 459,000, according to a Bloomberg News survey. The total number of people receiving unemployment insurance fell, and those
getting extended payments plunged.
*****

Asia was lower overnight and
Europe is lower at midday. U.S. futures look to open lower and Oil is $75.15.
*****

(TheStreet) -- Micron
Technology
(MU) shares took a hit Wednesday after Goldman Sachs dropped the bullish
stance it took on the chip maker's stock back in June. The firm downgraded the
stock to neutral from buy and cut its 6-month price target by 35% to $7.85 from
$12, saying it anticipates Micron will see weakness in its main DRAM business because of booming demand for tablet
computers, which typically have less memory than notebooks or netbooks."[W]e
underestimated the impact tablets would have on the PC supply chain, with
tablets cannibalizing notebooks faster and to a greater degree than we had
expected," Goldman said in a note to clients, adding later that it now
expects to see DRAM excess capacity "beginning to materialize in 4Q10
versus our prior expectation that DRAM shortages would persist through year
end."

We bought on the drop.
*****

Europe closed lower. U.S. stock measures closed mixed
in light trading. Breadth was slightly negative. Financial and bank
stocks can’t get out from their shadows and are a damper on the overall
markets. Tonight and tomorrow are Witching days and also Yom Kippur is tomorrow
night and so trading will probably be slow.
*****

September 15, 2010

Asia was mixed with Japan up 2%
and Europe closed slightly lower but firm.
*****

We bought Micron
Technology in accounts at $7. Yahoo/Finance: Micron Technology, Inc., together with its subsidiaries, engages in the
manufacture and marketing of semiconductor devices worldwide. Its products
include dynamic random access memory (DRAM) products that provide data storage
and retrieval, which include DDR, DDR2, DDR3, and other specialty DRAM memory
products, such as SDRAM, mobile DRAM, pseudo-static RAM, and reduced latency
DRAM. The company also offers NAND flash memory products, which are electrically
re-writeable and non-volatile semiconductor devices that retain content when
power is turned off. Micron Technology’s products are used in a range of
electronic applications, including personal computers, workstations, network
servers, mobile phones, flash memory cards, USB storage devices, digital still
cameras, MP3/4 players, and in automotive applications. It sells its products
to original equipment manufacturers and retailers through internal sales force,
independent sales representatives, and distributors, as well as Web-based
customer direct sales channel. Micron Technology, Inc. has joint ventures with
Intel Corporation, Singapore Economic Development Board, Canon Inc., and
Hewlett-Packard Company, Nanya Technology Corporation, and Photronics, Inc. The
company was founded in 1978 and is headquartered in Boise, Idaho.

Book value over $7 and priced at
one times revenues.
*****

The major stock
measures closed higher in light trading. Breadth was flat. Oil ended at $75.69 and Gold was 1269.*****

September 14, 2010

(Bloomberg) -- The U.S. Securities and Exchange Commission
has spent 15 years remaking the stock market into 11 competing exchanges and
hundreds of computer-driven traders. In the process it has virtually eliminated
the traditional market makers who bought and sold stocks when no one else
would. Now the SEC is concerned the revolution has gone too far, leaving
markets vulnerable when selling starts to snowball. Chairman Mary Schapiro called on the agency last week to examine whether the loss of “old specialist obligations” has hurt investors
after measures such as trading stocks in penny increments cut the number of those firms on the New York Stock Exchange to 5 from
25 in 2000. With market making now dominated by hundreds of automated traders
with few rules for when they must buy and sell, the SEC will consider ways to
keep the biggest from abandoning the market at the first sign of trouble. http://noir.bloomberg.com/apps/news?pid=20601010&sid=amUfMuMGP9XM

*****

Asia was mixed overnight; Europe
is lower at midday; and Oil has a $76 handle.
*****

Retail sales were a bit better
than expected and futures are flat ahead of the opening. With four up days and
it being Turnaround Tuesday in a Witching week we would not be surprised by a
down day.
*****

The media and even the president
use the $250,000 figure in the tax cut debate, probably because it is simple. Actually
many folks making $300,000 and more will pay no more since the tax rates apply
after deductions for mortgage interest expense, state and local and real estate
taxes and also donations etc.
*****

We added to
our Medtronic’s holding and also to Boston Scientific. BSX is on its all
time low.
*****

Reuters) - Shares in Cisco Systems
rose on Tuesday after CNBC television said the company will start paying a
dividend with a yield of between 1 and 2 percent beginning in 2011.

*****

The major market measures opened mildly lower, then traded higher most
of the day and closed mixed with the DJIA and the S&P 500 down and the NAAZZ higher. Breadth was positive but
financials couldn’t rally and that was the drag. Volume was light.
*****

Asia and Europe were higher
overnight and Oil has a $77 handle. Gold is $1244.
*****

We added shares of Applied
Materials to accounts that own it. It has a 2.6% yield and is Priced at
less than $10 times next year’s earnings.*****

The major market
measures made it four days plus in a row with the S&P 500 up 1% and the
NAZZ up 2%. Friday is Quintuple Witching so the week could be volatile. Breadth
was 4/1 positive and volume was light.

September 10, 2010

(Bloomberg) -- CBOE Holdings
Inc., operator of the largest U.S. options market, asked
regulators for permission to become the nation’s first to list contracts that
expire in as little as one day.

The daily options would be linked
to as many as 200 stocks, exchange-traded
funds, exchange-traded notes and indexes, according to a filing with the Securities and Exchange Commission dated Aug.
24. The contracts may have terms of one, two, three or four days, the owner of
the Chicago Board Options Exchange said. The options will “provide market
participants with a tool to hedge overnight and weekend risk, as well as the
risk of special events such as earnings announcements and economic reports, and
pay a fraction of the premium of a standard or weekly option,” CBOE said in the
filing, which was posted on the firm’s website.
*****

Asia was higher overnight. Gold
$1247 and Oil has a $75 handle as the trading day begins.
*****

American Eagle
Outfitters said
in a regulatory filing that its Chairman Jay Schottenstein this week bought
500,000 shares at $13.58 a share.*****

Cisco is on a 12 month low and at 15
times earnings. We added shares to accounts that own Walgreen. We also bought Applied
Materials in accounts that own Medtronic
and added shares of Dell to larger
accounts*****

A friend mentioned that the fool
pastor in Florida who wants to burn Korans is probably receiving thousands of
dollars in checks from around the country. Our friend is in direct mail and
solicitations and he says that when any of these fools is on TV other fools who
agree send money to show their solidarity. Only in America.
*****

The major stock measures
closed mildly higher in light trading. European bourses were mixed.

*****

September 9, 2010

With a dearth of information the
markets have rallied on a Jobless claims number that was better than expected
at 451,000 job losses for the week. Asian markets were higher overnight as are
European markets at midday. U.S. futures will have a slightly higher opening.
*****

Major stock measures
closed higher in light trading. European bourses were higher at their close.

The tech analysts at UBS this morning went into
full-scale retreat mode on PC-related technology shares, as they slashed their
2010 PC unit growth forecast to 13.1%, from 18.4%, while
chopping their 2011 view to 9.1% growth, from 9.4%. For further info see http://blogs.barrons.com/techtraderdaily/2010/09/08/retreat-ubs-cuts-pc-outlook-downgrades-intel-hp-others/?mod=yahoobarrons.
The analysts downgraded Hewlett Packard
and Intel among others to hold from buy. Intel trade at $24 this year and
now is at $18. HPQ traded at $54 and now is at $39. We would suggest these folks are a little late in removing their buy recommendations.

We bought more
Intel on the downgrade. With a 3.5% yield when cash yields nothing and 25% off
its high we are content to take the short term risk for longer term gain. We
also added more GE with a 3% yield to larger accounts

*****

(Yahoo/Finance) The Mortgage Bankers Association reported a
1.5% decline in mortgage applications for the week ending Sept. 3 versus a 2.7%
increase in the prior week. The decline in the latest report was driven by a
3.1% drop in refinancing applications; however, it is worth noting that
purchase applications increased 6.3%, which marks the seventh increase in the
last eight weeks.

*****

HPQ is busy. They are selling $3
billion in bonds, suing Oracle and looking for a new CEO.
*****

The major measures closed
higher in light trading. The NAZZ was up 1% while the DJIA gained 0.50% as it
was held back by weakness in Intel and HPQ. Breadth was positive. European
bourses also closed higher. Gold was flat at $1250 and Oil ended with a $74
handle.

*****

&nbsp

September 7, 2010

Today is the day the markets
worry again about European bank solvency. The WSJ has an article about the way
the banks accounted for the debt of countries in Europe that was held on their
books. This crisis will have the life span of a butterfly but it makes for
interesting trading. Markets look to open lower after the rally of the last
week. Our guess is that the rally mode will continue intermittently until the
November elections. After that our crystal ball is cloudier.
*****

Late Friday we switched BB&T Banks to Fifth
Third Banks.

*****

Asia was lower on Tuesday as is
Europe at midday after both Asia and Europe were higher on Monday. Oil has a
$73 handle and Gold is at $1255.
*****

Stocks were 1% lower in
light post holiday trading the major measures closed down 1%. European markets
also closed lower.

*****

September 3, 2010

We are taking the next few days
off from regular posting. As in the past there may be some random posts and the
Model Portfolio value will be posted daily. The markets are the markets and the
big boys and girls will have their HFT fun whether we are sitting here or away.
We own good stocks at good prices and have cash on the sidelines if the markets
continue their black swan dive. We will return on Tuesday September 7.

The Employment Report was better
than on Friday and the previous two months were revised positively and those
numbers led to an early morning rally that held. The U.S. lost 54,000 nonfarm jobs in
August, the Labor Department said. The decline was smaller than the 105,000
loss expected. Excluding census workers and other government employees, nonfarm
payrolls expanded by 67,000 in August, higher than the 30,000 gain expected.
The unemployment rate ticked higher to 9.6% in August from 9.5% in the previous
month and was in line with expectations. Both June and July payroll
employment were revised up. June was revised from -221,000 to -175,000, and the
change for July was revised from -131,000 to -54,000. Guess the
market drop when the July numbers were reported shouldn’t have been Oh well.
*****

Walgreen said comparable-store sales for August rose 2.1%. That
included a 0.7% increase in non-pharmacy sales and a 2.9% gain in pharmacy
sales. Total sales rose 8.6% to $5.66 billion, including contribution from its
April purchase of former rival Duane Reade.
*****

We soldKBE, KRE, Alcoa, and J Crew. After the four day 5% rally we
want to take a few dollars off the table. We use the bank ETFs (KBE, KRE) as
market substitutes and are trading out on the rally in the markets. There are
no specialists anymore (in name only) and with HFT (high frequency computer
trading) controlling the markets the daily share price moves in individual
companies are outsized and tradable. We will continue to trade around core
positions. We did add shares of Intel
to accounts. It is cheap at less than 10 times forward earnings and with a
3.5% yield*****

September 2, 2010

We are taking the next few days
off from regular posting. As in the past there may be some random posts and the
Model Portfolio value will be posted daily. The markets are the markets and the
big boys and girls will have their HFT fun whether we are sitting here or away.
We own good stocks at good prices and have cash on the sidelines if the markets
continue their black swan dive. We will return on Tuesday September 7.

There have been fourteen 90% down days since April and thirteen 90% up days since April
including yesterday. 90% upside/downside
days used to be a rare occurrence until the advent of HFT trading. A 90% Upside Day means that the NYSE Upside
Volume / (NYSE Upside Volume + NYSE Downside Volume) is greater than 90% AND the Points Gained / (Points Gained +
Points Lost) is greater than 90%.
*****

90% days used to signal turns in the markets. Now they just signal that
the computer jockeys are controlling day to day trading.*****

Dell and Hewlett
Packard are engaged in a bidding war for 3Par which is a ‘cloud computing’ company ( http://en.wikipedia.org/wiki/Cloud_computing . The bid price has now risen to almost $3
billion. We think HPQ will win the bidding war. HPQ is down because CEO Hurd left by request
and analysts think the company will suffer. We have never been enamored of CEOs
being indispensable and we view the price drop as a buying opportunity with the
shares trading at 10X earnings. HPQ can well afford $3 billion and since cash
is earning nothing these days the cost of 3Par while high will provide HPQ with
and area of storage that it is lacking.
*****

Dell made an initial $1.5 billion bid to enter a new area of computing
and lessen its dependence on hardware. They too have enough cash to fund a high
offer. If they lose Dell will receive a $75 million breakup fee which should
pay the lawyers with some left over for candy.

At 10AM Dell said it wouldn’t raise its offer to match HPQ. Both stocks
rallied.
*****

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